Rail service to Mare Island in jeopardy again

Touted just last year as the key to unlocking Mare Island's potential as an economic driver, its train service provider is being run out on a rail, its operators say.

Mare Island Rail Service (MIRS) officials say Lennar Mare Island (LMI), which owns most of the track, canceled its contract early and won't accept an offer to provide rail service at no cost to Lennar or the city.

"We've gotten notice to be out by the end of the month," vice president Rydel Peterson said.

Washington-based Tri-City & Olympia Railroad, doing business as Mare Island Rail Service, still has the 20-year agreement with the city to use the tracks through town, but has been warned that after year's end, setting wheels on the island would be trespassing.

Lennar Mare Island officials say they are all for rail service on the island but can no longer subsidize it. A similar scenario played out in 2008, when California Northern Railroad lost its contract with Lennar.

"LMI has always supported rail service on Mare Island," company spokesman Jason Keadjian said. "A LMI subsidy has helped make rail service on Mare Island possible."

Keadjian said LMI's contract with the rail service ends at the end of 2012 and that only three businesses on the island -- Alstom Transportation, Inc., Alamillo Rebar, Inc. and XKT engineering, Inc. -- use it.

Peterson and Alamillo Vice President Joe Alamillo said they think Lennar hopes to rid the island of rail service for good.

"Lennar's trying to close it out. That's their goal," Alamillo said. "They have a different type of development in mind."

Lennar officials, however, say they tried offering to renew the MIRS' contract with "substantially the same terms," as it has now, and sees the firm's counter offer as being "in significant conflict with existing Mare Island agreements and entitlements and would have far-reaching impacts on economic development," Keadjian said. "MIRS' proposal in effect would prioritize its business model over other land uses, businesses, jobs and economic development on Mare Island. LMI repeated its offer to amend the contract that has been in effect for two years," including a continued subsidy.

Peterson makes the case that access to rail and water transport is among Mare Island's most important draws for industrial commerce and losing rail service would eliminate their rail customers' competitive edge.

When Mare Island Rail Service inked its deal with Lennar nearly two years ago, Peterson said company officials envisioned increased use of the island for exporting goods by ship. By combining access to trucking, rail and ship transportation, Mare Island could become a regional commercial hub, he said at the time.

But if an agreement with Lennar isn't reached soon, rail service comes to a screeching halt Dec. 31.

At least one business is already going to plan B.

"We're already looking for other means," Alamillo said. "We got a letter from Lennar saying they're shutting (the rail line) down. We have to go elsewhere. It will increase our costs, but we had to make other shipping arrangements. Life is what it is."

Contact staff writer Rachel Raskin-Zrihen at (707) 553-6824 or rzrihen@timesheraldonline.com. Follow her on Twitter at Rachelvth.